3 Ways to Gift for College
Family members have the best intentions when they offer money to cover college expenses, but if they neglect to use a wise gifting strategy they could affect the student’s eligibility for federal aid. With hundreds of higher education institutions, state and private universities in North Carolina, students have no shortage of options. However, the cost of college can range from several thousand to over $45,000 per year.
- Make gifts after federal aid is established and the tuition bill arrives. Since federal student aid applications require disclosure of savings, any additional money in accounts will reduce the student’s eligibility for aid. For young students who are still dependents, even money under their parents’ names will be factored into their aid application.
- Send gifts to parents. When a relative gives money directly to the student they are affecting the student’s eligibility for financial aid. Wait until federal aid is established before gifting money to the student’s parents.
- Consider covering other expenses. If you choose to cover the car payment for a commuter student, or the mortgage of a loved one returning to school who is also supporting their own family, make sure the bills you are paying on their behalf do not exceed $14,000 per year (2013). If the amounts given are in excess there are necessary gift tax reporting requirements. (However, gifting directly to an educational institution for payment of tuition is not subject to the $14,000 annual exclusion. These gifts are unlimited.)